Consistency and Recovery in Retail Supply Chains

(2018) Journal of Business Logistics, 39(1): 26-37

Chicago Booth Research Paper No. 16-09

37 Pages Posted: 31 Mar 2016 Last revised: 13 Sep 2018

See all articles by Elliot Bendoly

Elliot Bendoly

The Ohio State University

Nathan Craig

Ohio State University (OSU) - Fisher College of Business

Nicole DeHoratius

University of Chicago - Booth School of Business

Date Written: June 21, 2017

Abstract

Practitioners and researchers describe inventory service level with metrics that communicate the likelihood of demand fulfillment without considering the on-going capabilities of the supplier, e.g., in-stock and _ll rate. We develop a method for measuring inventory service level that incorporates such supplier capabilities, namely consistency (the ability of a supplier to fulfill orders repeatedly) and recovery (the ability of a supplier to fulfill orders after a lapse in service). Using data from two retail supply chains, we illustrate our approach. To demonstrate the impact of consistency and recovery on supply chain performance, we model a retailer purchasing from competing suppliers with different levels of consistency and recovery. The model incorporates the retailer's uncertainty about demand and the retailer's uncertainty about its suppliers' service levels. We characterize how the retailer's orders and profitability change with a supplier's delivery performance through numerical experiments calibrated with field data. We find notable differences in market share across suppliers with similar traditional inventory service level metrics but differences in consistency and recovery. Further, we observe that a retailer can increase its profitability by determining orders via consistency and recovery in lieu of common metrics like in-stock. Given the influence of consistency and recovery on supply chain outcomes, we discuss implications for practice and future research.

Suggested Citation

Bendoly, Elliot and Craig, Nathan and DeHoratius, Nicole, Consistency and Recovery in Retail Supply Chains (June 21, 2017). (2018) Journal of Business Logistics, 39(1): 26-37; Chicago Booth Research Paper No. 16-09. Available at SSRN: https://ssrn.com/abstract=2757134 or http://dx.doi.org/10.2139/ssrn.2757134

Elliot Bendoly

The Ohio State University ( email )

Fisher College of Business
2100 Neil Ave
Columbus, OH 43212
United States

HOME PAGE: http://www.bizbreed.com

Nathan Craig

Ohio State University (OSU) - Fisher College of Business ( email )

2100 Neil Avenue
Columbus, OH 43210-1144
United States

Nicole DeHoratius (Contact Author)

University of Chicago - Booth School of Business ( email )

5807 S. Woodlawn Avenue
Chicago, IL 60637
United States

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